CICC: Media sub-sector performance may diverge, gaming sub-sector may show resilience.

CICC releases a research report, predicting that the performance of key companies in the media and internet sector in the first quarter of 2026 may show differentiation among sectors. The online gaming industry maintains a high level of prosperity, with a focus on the continued operation of new games and the pace of key new game launches. Marketing and advertising benefit from the application of AI with marginal incremental gains. Due to the high base figure during the 2025 Spring Festival holiday period, the overall box office revenue for movies in the first quarter is expected to drop by approximately 50%, putting pressure on the performance of many film and television companies. The book publishing and cable television industries are relatively stable. Recommendations for 2026 include: 1) deepening the application of AI, increasing efficiency and realizing commercialization; 2) expanding the "Hallyu wave" overseas, tapping into the potential of internet literature, short dramas, and games; 3) upgrading IP demand and reevaluating industry value. Key points from CICC are as follows: In the first quarter of 2026, CICC previewed 27 key A-share companies with a total market value of 817.5 billion yuan, accounting for 50.3% of the total market value of the media sector (Shenwan Index). 1) Digital media: Mango TV has relatively fewer key drama series and variety shows broadcasted. It is recommended to pay attention to the spring lineup and advertising budgets of various platforms. 2) Online gaming: The industry maintains a high level of prosperity (11%/31% year-on-year increase in domestic/export revenues in January and February); new games from 2025 contribute revenue and profit year-on-year. Some companies may face profit pressures due to pre-marketing expenses. Focus should be on the continued operation of top new games and the performance of new games (Perfect World's "Yihuan" and 37 Interactive Entertainment Network Technology Group's "Last Asylum") upon launch. 3) Marketing and advertising: AI application placements and the Winter Olympics will bring some budget increments, with Focus Media seeing an increase in investment profits in the first quarter through the N300 trade. 4) Film and television distribution: According to Ent Group, national box office revenue including service fees in the first quarter of 2026 dropped by 48.8% to 11.9 billion yuan year-on-year, with a 48.0% decrease in viewership to 270 million people and a 6.3% decrease in average ticket price to 43.9 yuan year-on-year. CICC believes that the spring festival box office revenue in 2026 has declined significantly, with market expectations already factoring in pressure on the first quarter performance of film and television distribution companies. It is recommended to focus on the box office elasticity of the upcoming May Day and summer holiday seasons. 5) Book publishing: Standardization of teaching auxiliary materials is expected to bring some revenue disruptions. 6) Cable television: According to data from the Ministry of Industry and Information Technology and Gouzheng, the competition landscape for IPTV and OTT platforms nationwide in January and February is relatively stable, and CICC believes that the performance of relevant companies in the first quarter of 2026 is also relatively stable. Valuation and recommendations Taking into account the marginal trends in fundamentals and industry valuation levels, adjustments have been made to profit forecasts and valuations for some companies. A-share recommendations include Focus Media Information Technology, Zhejiang Century Huatong Group, and 37 Interactive Entertainment Network Technology Group; Hong Kong and U.S. stock recommendations include CHINA LIT, Kuaishou, NetEase, and MAOYAN ENT, among others. Risks Macroeconomic fluctuations, regulatory tightening, and underperforming content or product performance.